Car loan a few clicks away

Ever wondered whether you are eligible for a car loan? Help is just a few mouse-clicks away.

Axis Bank and HDFC Bank have started online services that allow customers to do just that. Even public sector banks are likely to follow suit, say banking industry observers.

What’s more, Axis Bank has even extended its services to all potential customers. You need not be an Axis Bank account-holder to check eligibility for car loans on its website.

Jairam Sridharan, senior vice-president and head - consumer lending and payments, Axis Bank, says the online car loans concept is “very popular in the West and has just started to catch up in India. We started this in September (2011), and since then, every month we’ve been getting 5,000 and more hits”.

In a three-step process, a customer has to log on to the loan section of the bank’s website and check her eligibility by keying in basic details like name, salary, occupation, name of the company and the car she wishes to buy.

After this, the bank communicates with the Credit Information Bureau of India Ltd (Cibil) in real time and checks how much exposure it can take on the individual. The bank will also scrutinise other details provided by the loan-seeker.

If the loan is approved online, the customer would receive a ‘congratulations’ message on the screen and an approval letter. The customer can then take a print-out of the letter and visit any branch of Axis Bank for a car loan. A formal approval letter is then issued once the bank collects documents from the customer.

“The customer can take this approval letter and visit any car dealer. His job becomes smoother as the letter clearly indicates that the client is eligible for a loan,” says Sridharan.

There are incentives for car buyers if they, after confirming their eligibility online, apply for a loan from the same bank.

For example, if you check details on the Axis Bank website, and then apply for a loan from the same bank, then the bank will offer attractive interest rates.

It may also extend loan-to-value (LTV) from 80% to 90%, which means providing up to 90% of the loan amount instead of 80%. Hence, the individual will have to shell out only 10%.

“This will push car dealers in tying up with other banks so as to offer competitive rates. With this, the car dealer will not take customers for a ride by saying, ‘I am giving a loan for 14% and for you, I shall give it for only 13.5%’. This is because the customer might have got the loan approved from a bank for, say, 11.5%. To that extent, there will be control,” says Suresh Sadagopan, who runs Ladder7 Financial Advisory Services.

Mostly, customers hunting for car loans worth Rs4-5 lakh are seen availing the service.

“Currently, it is used more by net-savvy customers. We get more than 5,000 hits every month on this. But in the time to come, it will definitely be more,” says Rajan Pental, executive vice-president and business manager (auto loans), HDFC Bank.